Succession Planning Has a Future Problem

I have been thinking quite a lot recently about succession planning, and particularly about whether we sometimes ask the wrong question.

When boards talk about succession, the conversation quite naturally turns to people. Who could step up? Who is nearly ready? Who might replace the CEO, CFO or another member of the executive team if they left tomorrow?

These are all perfectly sensible questions, of course, but I wonder whether there is a more important one that should come first:

What will this job actually require in three or five years' time?

Because I am not convinced it will require quite the same things it requires today.

The job is changing

Look at what has happened to senior leadership in just the past few years. A CEO does not need to be a technologist, but increasingly they do need to understand enough about AI to decide where to invest, where the risks lie and how it might change their business. They are dealing with geopolitical uncertainty, volatile supply chains, skills shortages, changing expectations from employees and investors, and transformation programmes which seem to arrive before the previous transformation has finished.

The ONS recently found that 35% of UK businesses were already using at least one AI technology, while 55% of employees said they were using AI for work or education, but among businesses struggling to adopt AI, lack of expertise remains a significant barrier.

There was another ONS finding that interested me even more - among businesses in the highest decile for management practices, 88% had adopted at least one of the major technologies examined and among those in the lowest decile, it was only 51%.

That feels important because technology itself is only part of the story because you can buy technology, you can bring in advisers and you can recruit technical specialists. What is much harder to acquire overnight is the leadership judgement required to decide what matters, what does not, what should change and, crucially, how you take people with you.

And that rather neatly brings me back to succession.

Are we developing people for yesterday's job?

I have seen succession plans which are extremely detailed with names, boxes, readiness assessments, development plans and careful distinctions between "ready now", "ready in two years" and "ready in five", but there is a danger in all of this apparent certainty.

If we identify someone as a potential CEO in 2026 and spend the next five years preparing that person for the role as it exists today, what happens if the organisation needs a very different kind of CEO by 2031?

That is not an argument against internal succession, in fact it is quite the opposite. Developing your own people properly is one of the best things an organisation can do, because somebody who understands the business, its people, customers and culture can have an enormous advantage - but there is a difference between developing people and anointing them.

Once somebody becomes "the successor", it is remarkably easy for an organisation to start arranging the evidence around the conclusion. They are given the right exposure, moved into the right roles and increasingly regarded as the natural choice, but by the time the appointment arrives, asking whether somebody else might now be better suited can feel almost like undoing years of work.

Perhaps we need to be a little less certain.

The pipeline tells us something important

There is an interesting parallel in the progress British companies have made on board diversity. Women now hold around 43% of FTSE 350 board positions, compared with fewer than 10% when the succession of government-backed reviews began in 2011. The Parker Review has also recorded substantial progress in ethnic diversity on FTSE boards. Those changes matter because they show what businesses can achieve when something is measured and kept firmly on the agenda, but if we look slightly further down the leadership pipeline the picture becomes more complicated.

Despite women holding roughly 43% of FTSE 350 board positions, they hold only around 8% of FTSE 350 CEO positions. Women account for 35.9% of leadership roles below board level, while more than six out of ten appointments into those leadership populations during the latest reporting year still went to men. So perhaps the problem is not simply who gets a seat around the board table, it's who gets the experiences, opportunities, responsibility and trust that eventually make somebody a credible candidate to lead the organisation.

That is why I think succession planning needs to start much earlier than the succession plan.

Start with the business, not the successor

Rather than beginning with "Who could replace our CEO?", I would begin with "Where is this business going?"

What will threaten it? What will create growth? Which capabilities will matter more than they do today? What will technology change? Which markets will become more important? What kind of organisation are we actually going to be?

Only then would I ask who could lead it.

Sometimes the answer will be sitting inside the organisation already, which is exactly what good talent development should make possible, but sometimes the answer will be outside it because the business needs experience or perspective it simply does not yet possess.

The apparently safe appointment

What worries me more is the apparently safe appointment, because "safe" usually means familiar - someone from the same sector, with the expected career history, who has already done something very similar somewhere else and whose CV allows everyone around the table to feel reassured.

There are circumstances where that is precisely the right appointment, but there are others where appointing somebody whose experience perfectly matches your past is a rather strange way of preparing for your future.

The Financial Reporting Council already expects UK listed companies to maintain effective succession plans for boards and senior management, and its guidance talks about identifying future capability gaps as well as developing internal talent. I think the words future capability deserve far more attention than they sometimes receive because ultimately succession is not about having a name in a box, it is about having enough strong people, with sufficiently different experiences and perspectives, so that when the organisation reaches its next inflection point there is a genuine choice.

One question worth asking

Perhaps the question every board should occasionally ask is not:

"Do we have a successor?"

but:

"If the person on our succession plan was not already on it, knowing what we know about where this business is heading, would we choose them today?"

I suspect the answer to that question might occasionally make for a rather interesting board meeting...